The investors sued in 2009, claiming the company had overstated the value of holdings in its GE Capital unit, including its subprime loan holdings. The suit also targeted Goldman Sachs Group and other banks involved in GE's October 2008, $12 billion secondary stock offering. The investors also claimed GE's financial position threatened its AAA rating and ability to pay its quarterly dividend.

Before the settlement can go into effect, U.S. District Judge Denise Cote must grant the Illinois pension fund's request to represent a class of investors who bought GE stock from Sept. 25, 2008, through March 19, 2009. Cote must also agree with the parties that the settlement is fair and adequate.

"This settlement is in the best interests of shareowners as we avoid diverting significant resources to a lawsuit that we believe is without merit," Seth Martin, of GE, said Tuesday.

Judges dismissed claims against the banks and other defendants, allowing the case to go forward only against GE, Immelt and Sherin on claims based on the Securities Exchange Act of 1934. The court found the investors' claim that Sherin knew some of his statements about GE's financial health in 2008 weren't true was sufficiently substantiated to justify moving forward to trial.

"The second amended complaint has described a plethora of reports which tracked on a regular and detailed basis the quality of the assets to which Sherin's remarks were directed," Cote said in a ruling last year. "It is highly implausible that GE's CFO would be ignorant of basic facts contained in these reports about the quality of roughly one-third of GE Capital's assets."

Joseph Tabacco Jr., a lawyer for the investors, didn't immediately return a phone message seeking comment on the settlement.